1.Describe costing inventory using first-in, first-out. Address the different treatment, if any, that must be given...

1.Describe costing inventory using first-in, first-out. Address the different treatment, if any, that must be given for periodic and perpetual inventory updating.

2. Describe costing inventory using last-in, first-out. Address the different treatment, if any, that must be given for periodic and perpetual inventory updating.

3.Describe costing inventory using weighted average. Address the different treatment, if any, that must be given for periodic and perpetual inventory updating.

Solutions

Expert Solution

1. The FIFO method assumes the first units acquired are sold first. On a periodic basis, it means that ending inventory can be determined by calculating the number of units remaining, and assuming that the cost of those units is the amount paid for the latest purchase. Cost of goods sold is all inventory cost that is not in the ending inventory. For perpetual, inventory held at the time of each sale is evaluated and units acquired earliest are taken as cost for that particular sale.

2. LIFO means last is first out. LIFO is one the methods of inventory valuation. Under this method, the inventory purchased last is assumed to be sold first. LIFO method can be followed under periodic inventory system as well as under perpetual inventory system. On a periodic basis, it means that ending inventory can be determined by calculating the number of units remaining, and assuming that the cost of those units is the amount paid for the first purchase. Cost of goods sold is all inventory cost that is not in the ending inventory. For perpetual, inventory held at the time of each sale is evaluated and units acquired latest are taken as cost for that particular sale.

3. The weighted-average method requires that the average cost be computed for all units that are available for sale. For periodic weighted average, the total dollar amount of goods available for sale should be divided by the total number of units available for sale, to obtain the average cost for the entire period. For perpetual, the average cost would be recalculated each time the total number of units changes, using the same strategy as described for periodic, but using the cost and number of units that are available at the time of sale.

ekkarill92 answered 1 year ago

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